SMEs face pensions advice gap

Small and medium-sized (SME) employers are suffering a severe shortage of advisory support in managing their pensions schemes, according to Dr Debbie Harrison, senior visiting fellow at The Pensions Institute at Cass Business School.

Speaking at the Employee Benefits Pensions and Workplace Savings Summit on 31 January, Harrison expressed concern about SME schemes with high charging structures.

She said: “My biggest concern is the smaller employer market where there is a very thin advisory market because [the employers are] not terribly attractive because, for example, of low contributions.”

Harrison said there remained a number of pension schemes with a 3% annual management charge (AMC), which compares poorly with the 0.5% AMC charged by newer pension schemes such as the national employment savings trust (Nest).

“The person that is paying into that higher charging fund is going to end up with only half a pension in retirement,” said Harrison. “Now you can do whatever you like with clever asset management, but that doesn’t get around the fact that those high charges are a real problem.”

Harrison welcomed the claim by Bridget Micklem, head of private pensions policy and analysis at the Department for Work and Pensions (DWP), who kicked off the Summit, that the DWP might have to take a hard line with providers with uncompetitive charging structures. However, she questioned exactly how this would work in practice.

She said: “What I’m not yet sure about, which is no doubt work in progress, is how these schemes will be filtered out and whether it’s [The Pensions Regulator] TPR that does that.”

She added: “And the problem of advice in the small [employer] market is a real issue – who is going to tell these people where to go if they’ve got a bad scheme at the moment, or a high charging scheme?”.